With no credit history and no approval process, how do you borrow money in DeFi?
First, what it is: the liquidation threshold for each type of collateral is usually higher than its loan-to-value ratio, so even when you borrow up to the limit, there’s still some room before liquidation.
Here’s the logic: on-chain lending has no credit checks, and borrowers are just anonymous addresses. The protocol can only reduce the risk of bad debt by requiring the value of the collateral to exceed the amount borrowed.
$AAVE is the governance token of the on-chain lending protocol Aave.
Markets are always uncertain, so decide in advance what you’ll do if your judgment is wrong.
First, what it is: the liquidation threshold for each type of collateral is usually higher than its loan-to-value ratio, so even when you borrow up to the limit, there’s still some room before liquidation.
Here’s the logic: on-chain lending has no credit checks, and borrowers are just anonymous addresses. The protocol can only reduce the risk of bad debt by requiring the value of the collateral to exceed the amount borrowed.
$AAVE is the governance token of the on-chain lending protocol Aave.
Markets are always uncertain, so decide in advance what you’ll do if your judgment is wrong.